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Taiwan raises 2015 growth outlook, no deflation risk seen

Taiwan slightly raised its 2015 economic growth target to its highest in four years on stronger demand at home, though exports and imports could slow sharply on weakening global demand.

PHOTO: REUTERS

[TAIPEI] Taiwan slightly raised its 2015 economic growth target to its highest in four years on stronger demand at home, though exports and imports could slow sharply on weakening global demand.

The island's export-driven economy has seen solid worldwide demand for the tech gadgets it manufactures, especially as consumers rushed to buy Apple Inc's newest iPhone 6, but the government and analysts have warned of growing risk of slowdown in China and other global economies.

The GDP target was raised to 3.78 per cent, its highest since 2011, from preliminary growth of 3.5 per cent, the Directorate General of Budget and Accounting Agency said on Monday. The economy expanded 3.51 per cent in 2014. "We are relatively optimistic on the outlook for domestic demand," the government agency said in a statement.

However, full-year exports are expected to grow a slower 1.02 per cent, and imports to contract 2.07 per cent, their worst since 2012, the agency said.

Fourth-quarter GDP growth was revised upwards to 3.35 per cent from a year earlier versus a preliminary forecast of 3.17 per cent, it said.

The 2015 consumer inflation target was cut sharply to 0.26 per cent from a previous forecast of 0.91 per cent, reflecting lower oil prices which the agency said it would set at $58.5 per barrel.

Still, analysts said Taiwan was not at risk of deflation. "I'm not worried that Taiwan will follow the path of Japan or Korea, that are faced with a very high risk of deflation," said Raymond Yeung, a senior economist of ANZ, Hong Kong. "We don't see that (the central bank) will hike interest rates this year. Probably the earliest it will start to act is March next year."

Since the statistics agency's last GDP review in late November, central banks around the world have acted to counter disinflation and slowing growth by easing monetary policy even as the US economy appears to be recovering strongly.

The Federal Reserve's latest upbeat assessment of the US economy, the ultimate destination for many Taiwan-produced tech gadgets, continues to favour a more optimistic view of Taiwan's economy.

Taiwan tends to follow the Fed's monetary policy closely and most economists don't expect the island's central bank to raise benchmark interest rates until the second half of this year, at the earliest.